Upmarket estate agent Savills warned yesterday that profits for 2008 would be "significantly" below forecast as the housing market continues to be clobbered by the credit crunch.

In its second profits warning in just two months, Savills also warned that it is reviewing its dividend policy. It blamed transaction volumes in its European, US and mortgage brokerage businesses, which had slumped beyond expectations. House broker Royal Bank of Scotland has revised its 2008 pre-tax forecast down from £40m to £32m.

"Whilst some deals are completing, we are not seeing the seasonal pick-up in activity we have grown to expect," said Savills chief executive Jeremy Helsby. "Many pipeline transactions, which were at an advanced stage, have either been delayed or are not proceeding." The group, which has 200 offices around the world, is planning further job cuts to reduce its costs.

Shares in the group plunged nearly 13% or 31.5p in early trading to 218.25p, but recovered later to close at 250p.

Meanwhile, rival agent King Sturge said it was putting its 75%-owned Spanish subsidiary into administration after a collapse in annual revenues.

Estate agents are suffering as would-be buyers are unable to obtain mortgages while banks and building societies continue to tighten lending conditions. The Bank of England said that mortgage approvals hit a record low in October, despite a fall in interest rates at the start of the month. Lenders approved 32,000 home loans for buyers during the month, equalling the record low in August and down 27% from the 2007 peak.

The Bank has slashed 3.25 percentage points off interest rates since February, but this has so far failed to boost the mortgage market.

The news from Savills came at the same time as figures released by property auction specialist the Essential Information Group (EIG) showed that the average price of a house sold at auction tumbled 31.1% in the three months to November, compared with the same period a year ago. This is more than double the falls reported by Halifax and Nationwide in their house price indices.

According to the EIG figures, the average cost of a house sold at auction now stands at £114,208, 34% lower than the peak last summer. Halifax said earlier this month that the average price of a house in the UK in November was £163,605, while Nationwide said it was £158,442.

Liberal Democrat Treasury spokesman Matthew Oakeshott said: "This drop of one-third in average auction prices gives a far clearer picture of the prices real buyers are paying now than indices based on mortgage approval, like the Halifax and the Nationwide's."

He said that auctions were the "real market", because contracts were exchanged and a deposit of 10% was paid as soon as the hammer fell on the deal. He added: "Real house prices are well on their way to halving."